Chinese Data Lead Risk On Assault...
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In This Issue..

* China moderates!

* Risk On!

* Scandis rally!

* Gold fluctuates...

And Now... Today's Pfennig!

Chinese Data Lead Risk On Assault...

Good day... And a Marvelous Monday to you! This past weekend, we observed the 9th years since the awful, cowardly acts on our nation. I was proud to see all the American flags flying on Saturday. I really don't like talking about 9/11, it brings back all those sick feelings I had that day, and the days following... I will never forget...

OK... Well, front and center this morning, we have a very nice currency rally going on. Yes, the Risk On, trading is happening, and happening in a big way! What's driving the Risk On assault VS the dollar, yen and Swiss franc? Ahhh... Grasshopper, you have learned well, of course, I already told you in the title! Chinese data has opened the flood gates to Risk Assets, and trading is flowing out of the Risk Aversion assets, even more U.S. Treasury selling!

But first, let's see what the Chinese data is that has the Risk Takers all lathered up this morning...

China reported that their August Industrial Production grew 13.9%, the most in 3 months, and... That August Retail Sales increased 18.4%... Sure doesn't look like their economy is collapsing now does it? Remember when all those economists and pundits were saying China's economy was going to collapse, and I kept responding by saying that it would "moderate" not collapse... Yes, you know me well... I'm patting my self on the back right now! HA!

The Aussie dollar is trading over 93-cents this morning, which is good, and the euro has gained over 1-cent to 1.28, but the real movers and shakers this morning are the Scandi currencies of Norway and Sweden, which always makes me happy, for I've been waving the fundamentals flag of Norway for 5 years now!

We also had an agreement last night in the Basel Committee on Financial Regulations, which was pushed by the Norway and Sweden. I couple of years ago, I wrote an article about the difference between the way Norway and Sweden (Scandis) handled their banking meltdown a decade earlier, and how the U.S. was handling their mess... I've said it many times, that you never heard one Scandi bank mentioned when banks all over the world were experiencing related problems from the U.S. financial meltdown...

For right now... Gold is seeing some selling, as stock around the world react to the strong Chinese data, and this has been the pattern now for some time... In the initial turning on of Risk, Gold gets sold... But as risk ramps up, people begin to see the light, and worry about inflation, etc. So... Here's your assignment if you choose to accept it... Watch Gold, and if it dips by a good margin, then look to buy at cheaper levels... Or not... Whatever floats your boat!

Well... There were some rumors over the weekend that the strong data in China would bring about a rate hike... But seeing none, the race to risk assets were on. Here's the thing that I've talked about for over 5 years now, and that is... The Chinese know that a strong currency fights inflation just as well as a rate hike, and if the Chinese economy is going to show resilience like it did in the two reports over the weekend, then Chinese officials can breathe easier about allowing the renminbi to gain VS the dollar.

And... So it is, that the renminbi reached the highest level VS the dollar since the dropping of the peg in July of 2005, overnight! It's "ON" in China, folks...

And if it's "ON" in China, that should benefit the Singapore dollar... Just remember I love you, no wait! Sure, I love you all, but that's not where I was going there before Firefall slipped into my head! No... Just remember, I've told you for years now, that the Asian currencies all trade in a range together, so that they can remain in competition for their exports... This is a case of: What's good for the goose...

Back in North America to finish out today... Canada doesn't really have much in the way of data to move the Canadian dollar / loonie this week. We will hear a couple of speakers from the Gov't as the week goes on, and their manufacturing data on Wednesday, but beyond that the loonie will have to look for help from the other Commodity Currencies, and... Don't forget the price of Oil! And, the price of Oil has been rising again lately, eh?

And here in the U.S. Three in five economists surveyed by The Wall Street Journal expect the U.S. Federal Reserve to resume large-scale purchases of securities in the face of a deteriorating economic outlook-but, by a 3-to-2 margin, most of them also think that would be a mistake.

The survey showed economists continuing to cut their growth forecasts for the rest of this year and into 2011.

Yes... I would throw my hat into that ring too, for I see the Fed Heads panicking acting like a person that just had the wind knocked out of them, gasping for air, and grabbing on to anything they can... And... Of course, I too say it would be a mistake, but I would also add the word BIG!

Well... That end of the bond rally talk I had with you on Friday, is still playing with the yield of the 10-year rising more on Friday to 2.82%... Here's something for you to chew on... Long time readers know that I've said over and over again that this dance is gonna be drag... And that is that when foreigners grew tired of bailing out the U.S. and their deficit spending, that they would demand higher yields at auctions for those Treasuries... And that may have been the case at the last auction, where the interest in Treasuries waned... Uh-Oh!

The Monthly Budget Deficit is due to print today, but sometimes it's delayed... Wink, wink... Yes, sometimes, I think they try to release the data when no one is looking... Any way, expect the monthly deficit to be near $100 Billion... Again!

Tomorrow, we'll see the August Retail Sales, which should have been boosted by back to school sales... The BHI (Butler Household Index) indicates that to be the case, so look for an "ok" Retail Sales... Nothing to get all lathered up about, but "ok"...

I read something last week that made so much sense to me, I wondered why the "talking heads" on TV weren't talking about it... Basically, the Gov't officials claim that this economic mess we're in is a recession that's (in their minds) over... But, you may recall the past couple of years, me referring to the economic mess as a depression...

Well... This is what I heard that plays well with my call of a depression, and that is the "soup lines" have been replaced by Gov't checks in mailboxes... With over 20% unemployment, and no, let me repeat, and no sign of an improving labor sector, and GDP that consists of nothing but Gov't. spending... the Gov't should call it what it is...

But that won't get them re-elected... I've got news for them, they might as well go out swinging, because they're not getting re-elected any way!

Then there was this... Recall a couple of weeks ago, me telling you that IRA custodians are reporting that people are pulling out their IRA funds early, and taking the penalty... Well, now the AP reported this past weekend that people are bailing out of bank CD's and parking their cash in checking and savings accounts that earn little or no interest (except at EverBank!). And in another sign that liquidity is at the top of most people's minds these days... $145.3 Billion has been pulled out of mutual funds this year... 414 mutual funds have closed or been merged into another fund this year, and most of them were stock funds... Liquidity never seems to be a big deal until there isn't any, right?

Of course, if they were diversified correctly and didn't have all their funds in those stock funds, then they wouldn't need to panic like this...

To recap... Strong Chinese data has opened the flood gates to Risk On this morning, and the currencies are taking back ground lost to the dollar, franc and yen. Gold is fluctuating, and The Basel III groundwork has been agreed on...

Currencies today 9/13/10: American Style A$ .9325, kiwi .7315, C$ .9710, euro 1.2810, sterling 1.5405, Swiss .9865, ... European Style: rand 7.1385, krone 6.13, SEK 7.1660, forint 221.50, zloty 3.0730, koruna 19.2530, RUB 30.71, yen 84, sing 1.3380, HKD 7.7675, INR 46.39, China 6.7611, peso 12.85, BRL 1.7215, dollar index 82.22, Oil $77.23, 10-year 2.82%, Silver $19.95, and Gold... $1,245.15

That's it for today... That little chubby kid that would sit in front of a computer all day 7 years ago, came in first place for his age category in a 5K this past weekend! Yes, congrats to my buddy, Alex, who finished first in the 19 and under age category for a 5K... Alex who is 15, led everyone for over half the race! Our Rams began their new season, much the way they played the last 2 seasons yesterday... UGH! They just don't know how to win, any more... We can't continue to finish last, we can't afford to pay 1st overall picks! And, the Cardinals won't be in the playoffs this year, but that doesn't stop us from enjoying watching arguably one of the best hitters in baseball history play... This is much like what my dad used to tell me about watching Stan Musial, but now I get to watch Albert Pujols... Wait till his contract gets renewed! Ok... Mike is here, I'm running late! I hope your Monday is Marvelous!

Chuck Butler


EverBank World Markets



Posted 09-13-2010 10:28 AM by Chuck Butler